Archive for the ‘Retirement’ Category

Whilst it is easy to be naïve about the eventuality of old age, retirement is an inevitability for everyone.

If you wish to avoid paying high levels of tax and ensure your finances are correctly distributed among the members of your family retirement planning is a crucial step that should not be overlooked.

Even for those who understand the importance of pension planning, research has suggested that as many as 20% of couples over the age of 40 have never discussed their pensions with 49% have no idea about the level of retirement income they can expect once they stop working.

Why is it Important to Discuss Family Finances?

These figures are worrying, especially since families have become increasingly interdependent. Furthermore with the recent shake up to personal and state pensions (new pension freedoms were announced in 2014 and a new flat rate state pension will come into force this April) there is even more reason to discuss your plans for later life to ensure your partner and family receive the correct inheritance once you pass.

Despite these changes to pensions however, research also suggests that there is a reluctance for couples to visit a financial adviser to discuss retirement planning, with nearly two thirds having never met with one as a couple.

What Has Changed in Retirement Planning?

Traditionally retirement planning has focused on the needs of an individual, or a couple. However as families become increasingly interdependent, the situation has become more complicated as people need to factor in siblings, adult children or even parents into their financial plans.

Why Should You Discuss Your Will with Your Family?

One of the key areas that can cause confusion, or even disagreements following the death of a loved one is the Will. By speaking to a financial adviser to draw up a Will, and then discussing your intentions beforehand you will decrease the chance of upsetting arguments when it comes to distributing your estate after you are gone.

For those who have not set up a Will then it is time to stop putting it off. As many as 84% of 18-34 year olds and more surprisingly as many as 35% of over 55s are thought to not have a Will in the UK.

If you pass away without a Will you are considered to have died Intestate and specific rules apply. These rules changed on 1st October 2014 with the main beneficiary of these changes being your surviving spouse/civil partner.

Consider the Tax Implications of Inheritance

If you are planning to leave an inheritance to members of your family it is important to consider the most tax efficient way to do this to ensure that your loved ones do not lose much of your gift.

It can also be a good idea to consider the requirements of your children or younger generations. Attitudes to inheritance have changed in recent years with some younger relatives preferring their older family members fully enjoying retirement rather than struggling in order to leave something behind.

For those already at retirement, you may have already had the all-important family discussion and come to the conclusion that your family will not require as much in inheritance as you originally thought. This information could change your attitude to retirement, perhaps making you consider equity release or other retirement options.

Discuss Your Finances with Family and Advisers

It is understandable that you find the discussion of finances after your death a difficult subject to approach with your spouse, partner or family. However understanding the intentions of those around you is incredibly important.

Coupled with this you should seek professional financial advice from someone who can help you plan both your retirement and passing to ensure your money and assets are properly taken care of.

If you are wishing to speak to someone about pensions, retirement or financial planning please do not hesitate to contact Maxim Wealth Management today on 0141 764 0040 (Glasgow) or 0203 841 9941 (London). Alternatively you can fill in our Contact Form and one of our team will get back to you.

Adjusting to retirement is a big change. Not having a job to go to every day after doing so for many years requires a complete lifestyle change, which you may or may not be prepared for, both mentally and emotionally.

The financial implications can be also seem daunting however with good planning, your sunset years can be comfortable and enjoyable.

By following the right preparation and advice you can make saving for your retirement easier. Here’s five areas you should consider to help you make the right plans in regard to saving for life after your working years.

1) Understand the new pension rules

If you have invested in a pension scheme, you have the freedom to decide how to take your pension. However, there are tax implications which many people do not understand. Typically, up to 25% of personal pension can be taken out without paying any taxes for those aged 55 years and above. The rest of it is taxable. Because pension income is put together with other income in the tax year the income is received and the total is taxed accordingly. This means that taking out a large sum could come with an equally large tax bill.

If your income is above a given bracket this could also cause personal allowance to be lost. To counter this you may benefit from spreading withdrawals over more than one tax year to benefit from tax allowances.

2) Pass on your tax benefits efficiently

The law enables you to pass on your pension upon your passing. This used to be subject to taxes of up to 55% if you had started withdrawing and the balance had been paid out as a lump sum. The rules changed and made it possible to pass on more of your pension upon your passing and in some cases, tax free.

For those who pass away before the age of 75, no income tax is paid when beneficiaries make withdrawals. After this age, withdrawals are taxed as income. Typically, pensions are exempt from inheritance tax. However, the rules vary depending on personal circumstances.

3) Two is better than one when it comes to tax allowances

Spouses as well as registered civil partners can transfer assets to each other without paying taxes. If one of you pays more taxes, it makes financial sense to spread or even them as a couple by transferring investments to save taxes on the one who pays less taxes. Also, a new Marriage Allowance has been introduced where it is possible to transfer 10% of personal allowance between partners to bring down the joint tax bill.

4) Taking all the shelter you can will also make a difference

There are a number of tax shelters available. The best known is the Individual Savings Account (ISA) that does not attract Capital Gains Tax or any other tax on income. Income from ISAs does not need to be declared making them ideal for generating additional, tax-free income for retirement. It is important to understand that an ISA is not in itself an investment but a way to shelter your savings and investments from tax.

You can withdraw from you ISA when you need to and they have no upper age limit. Individuals can put a maximum of £15,240 in an ISA for the current tax year (2015/16) and allowances can now be divided between different ISAs such as Stock and Shares ISAs and Cash ISAs as per an investor’s choosing.

5) Maximize on tax allowances

There are other changes that have been made that will be implemented this year where there will be added tax-free allowances for cash interest and income from shares or dividends. Some retirees may be paying thousands of pounds in taxes that they perhaps shouldn’t be. The changes have been confusing for some and unfortunately this has led to some not being able to take advantage of all the tax-free allowances they can get.

Speak to a Financial Adviser About Your Retirement Today

Sitting down with a professional financial adviser could have a major impact on your tax bill and improve the quality of your life in retirement. A pension adviser will be able to look at every aspect of your pension and help you understand how to make the most of these changes.

Maxim Wealth Management offers independent financial advice on pensions, retirement, equity release and other aspects of personal finance management. Contact us today to discuss your pension and let us help create the best possible retirement plan.

“Breaking up is never easy” but sometimes it’s the best you can do. The Abba hit “Knowing Me, Knowing You” was released in 1976. A lot has changed since then, but breaking up still remains a painful and potentially expensive matter.

The Basics of Divorce

There are three steps to getting a divorce.

Step one is to file a divorce petition. This currently carries a fee of £410.

If your spouse accepts the divorce petition, you can then apply for a decree nisi. This is essentially a statement which confirms that it is legally acceptable to end the marriage. If your spouse refuses to accept the petition and you wish to proceed with the divorce, you will need to attend a court hearing. You may require legal representation for this. The cost of this will vary depending on your needs.

If a decree nisi is granted, there is a 6-week cooling off period before you can apply for a decree absolute. The decree absolute formally and finally ends the marriage.

The Basics of Divorce Finance

It is perfectly possible and legal for two parties to divide their assets between themselves amicably upon divorce. Whether or not this is advisable depends on a number of factors.

Even if the divorce is amicable, it may still be worth both parties taking legal advice. Divorce can be a highly emotional situation. Having professional legal advice can help to keep both people focused on the practicalities.

There are basically four points to consider when looking at finances during a divorce.

The needs of children.

The immediate needs of the divorcing parties.

Longer-term maintenance.

The division of assets and debts

Where there are children in a marriage their needs will always be the highest priority. After this, both couples will need sufficient funds to meet their current needs. How much this will be will depend on individual circumstances.

It may also be considered appropriate for one party to pay another maintenance over a longer-term period. This is particularly likely if there are children. Even without children, however, the lower-income partner may be entitled to maintenance.

How to Protect Your Finances in Divorce

Moving on financially after divorce is a bit like unscrambling eggs. Fortunately it can be done. You will need to disentangle yourself and your credit record from your spouse as quickly and effectively as possible.

One of your first priorities should therefore be to set up a current account in your own name. You should also aim to close all joint accounts as soon as you can. Separate lives mean separate bank accounts.

If you have joint debt, then this also needs to be dealt with. In an ideal world, the debt would be repaid as part of the divorce process. For example, joint assets could be sold and the proceeds used to pay the debt.

In the real world, this may not be possible. For example if children are to stay in the family home, then the mortgage payments on it will still need to be met.

Therefore the division of debts needs to be looked at just as carefully as the division of assets.

Divorce and Retirement Planning

Divorce can have a significant impact on your financial health in your later years.

First of all your existing retirement savings may well need to be split with your ex spouse.

Secondly you are each going to need to run your own home. This means that you may have the initial expenses of renting or buying a new property. It also means that bills which may have been split by two people now need to be paid individually.